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Definition of PPR when moving from one house into another property I own.

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Hi,

I'm having difficulty understanding the actual definition of a PPR with regards to CGT on an investment property.

I was under the impression, after taking advice, that I could rent out my home for up to 6 years without there being CGT implications, but on further reading I fear that this may not be the case.

I bought my house in NSW in around 2000, lived in it immediately, and it was my home until 2019.

In 2017 I bought an investment property in QLD and rented it out for 2 years.

In 2019 I retired and moved into my investment property in QLD and rented out the house in NSW.

My question is, am I exempt from CGT on my house in NSW if I sell it before it has been rented out for 6 years?

My confusion comes from several mentions of 'nominating' my PPR. What does that actually mean? Can I still nominate my NSW house as my PPR until I sell it, probably this year, even though I am living in a property I own in QLD?

I'm not bothered if the QLD house is subject to CGT from the time I bought it until the time I sell the NSW house, as it has hardly increased in value in that time.

Any clarification would be most welcome. Thank you very much.

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Most helpful response

ATO Community Support

Replies 0

Hi @zoomaloid2000,

 

The 6 year absence rule applies after a home has been used as your main residence. As you moved out of the NSW property in 2019, it would currently be viewed as absent for 2 years.

 

As the property has been used to produce income, when it's sold it would typically be looked at for capital gains tax for the period that it's been rented out, meaning the full CGT exemption wouldn't apply. This information is available on our webpage 'Renting out part or all of your home'.

 

CGT implications also apply to your property in QLD.  As you used this as an investment property before moving in,  then CGT applies for the period it was tenanted. So in this instance, the first two years.

 

In regards to your place of primary residence (PPR), generally, a dwelling stops being your main residence if:

 

• you and your family no longer live in it
• your personal belongings are not kept in it
• it is no longer the address your mail is delivered to
• it is no longer your address on the electoral roll
• services such as gas and power are no longer connected.

 

Although no one factor alone determines this, the length of time you're absent from it and any intention to re-occupy it are also relevant.

 

There are some conditions which may allow you to claim your first dwelling as your PPR for up to 6 years after you stop living in it though. Our webpage 'Treating a dwelling as a main residence after you move out' has further information about this as well as a few examples.

 

As we provide general advice on the forum, I would recommend that you contact our Early Engagement team for specific advice on your circumstances, as there may be some factors that would enable you to claim PPR for the NSW property, and subsequently alter the CGT obligations.
 
ATO Website- renting out part or all of your home

ATO Website- Main residence exemption

ATO Website- Treating a dwelling as your main residence after you move out

ATO Website- Early Engagement

 

RachATO

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Most helpful response

ATO Community Support

Replies 0

Hi @zoomaloid2000,

 

The 6 year absence rule applies after a home has been used as your main residence. As you moved out of the NSW property in 2019, it would currently be viewed as absent for 2 years.

 

As the property has been used to produce income, when it's sold it would typically be looked at for capital gains tax for the period that it's been rented out, meaning the full CGT exemption wouldn't apply. This information is available on our webpage 'Renting out part or all of your home'.

 

CGT implications also apply to your property in QLD.  As you used this as an investment property before moving in,  then CGT applies for the period it was tenanted. So in this instance, the first two years.

 

In regards to your place of primary residence (PPR), generally, a dwelling stops being your main residence if:

 

• you and your family no longer live in it
• your personal belongings are not kept in it
• it is no longer the address your mail is delivered to
• it is no longer your address on the electoral roll
• services such as gas and power are no longer connected.

 

Although no one factor alone determines this, the length of time you're absent from it and any intention to re-occupy it are also relevant.

 

There are some conditions which may allow you to claim your first dwelling as your PPR for up to 6 years after you stop living in it though. Our webpage 'Treating a dwelling as a main residence after you move out' has further information about this as well as a few examples.

 

As we provide general advice on the forum, I would recommend that you contact our Early Engagement team for specific advice on your circumstances, as there may be some factors that would enable you to claim PPR for the NSW property, and subsequently alter the CGT obligations.
 
ATO Website- renting out part or all of your home

ATO Website- Main residence exemption

ATO Website- Treating a dwelling as your main residence after you move out

ATO Website- Early Engagement

 

RachATO